THE IMPACT OF TAX-BENEFIT SYSTEMS ON LOWINCOME HOUSEHOLDS IN THE BENELUX COUNTRIES. A SIMULATION APPROACH USING SYNTHETIC DATASETS

Frédéric Berger, Monique Borsenberger, Herwig Immervoll, Julie Lumen, Bertrand Scholtus and Klaas DeVos
Additional contact information
Frédéric Berger: CEPS/INSTEAD
Monique Borsenberger: CEPS/INSTEAD
Julie Lumen: DULBEA, Université Libre de Bruxelles
Bertrand Scholtus: DULBEA, Université Libre de Bruxelles
Klaas DeVos: CentER Applied Research, Tilburg University

Microeconomics from University Library of Munich, Germany

Abstract: Computing the tax-benefit position of similar "typical" households across countries is a method widely used in comparative fiscal- and social policy research. These calculations provide convenient summary pictures of certain aspects of tax-benefit systems. They can, however, be seriously misleading because they reduce very complex systems to single point estimates. Using an integrated European tax-benefit model (EUROMOD), we substitute the typical household by a synthetic dataset, which can be used across countries. By varying certain important household characteristics (notably income), this dataset captures a much larger range of household situations. The calculations performed on this range of households not only show the tax-benefit position of many individual households but also demonstrate which household characteristics determine taxes and benefits in each country. Hypothetical calculations such as those presented here do not exploit the ability of EUROMOD to determine the impact of social and fiscal policies on actual populations. Nevertheless, they can be a valuable contribution to understanding tax-benefit systems since they allow us to separate the effects of tax-benefit rules from those of the population structure. We compute and compare disposable incomes for a large range of pre-tax-and-benefit income (so called budget constraints) of households in the Benelux countries. Disposable incomes are then decomposed to separately show the effects of each simulated tax and transfer payment. Based on these results, we illustrate the performance of the three tax-benefit systems in terms of ensuring a minimum level of household income.

Keywords: Microsimulation; European Union; Benelux; Average Production Worker; Poverty (search for similar items in EconPapers)
JEL-codes: C81 D31 D63 (search for similar items in EconPapers)
Date: 2003-02-07, Revised 2003-02-07
New Economics Papers: this item is included in nep-cmp, nep-eec and nep-pke
Note: Type of Document - ; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Impact of Tax-Benefit Systems on Low-Income Households in the Benelux Countries. A Simulation Approach Using Synthetic Datasets (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:0302003

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